It is at first glance a typically picturesque French village, where linden trees line the sleepy lanes, elderly men in berets pedal along La Grande Rue, the boulangerie van still does the baguette rounds, and half a dozen cars constitute rush hour.

But in a European landscape poisoned by toxic loans and crippling debt, Saint-Hilliers has a rather odd distinction. The village, 56 miles (90 km) east of Paris, has almost €1m (about £786,00) in the bank – amounting to more than €1,700 for every man, woman and child.

It might look like a blessing for these cash-starved times. But the village's cash pile is not due to prudent planning but to a feud of Jean de Florette proportions.

A bitter disagreement between local officials has divided the village and its 483 inhabitants, and put a stop to the council spending a centime on local projects, including a much needed library for the primary school and improvements to the boules ground. Now the village council has been reprimanded by regional officials and ordered to make more of an effort to "better use its abundant resources".

The row goes back to 2008 when, shortly after the village council was elected, Jean-Pierre Boisvert, a man in his 60s whose family has lived in Saint-Hilliers for generations, was named mayor. Disagreements, that were personal rather than political, emerged, with some councillors accusing their leader of heavy-handed governance at best, autocracy at worst.

To demonstrate their anger, a breakaway group decided on a symbolic vote against the adoption of the council's annual budget. With four members voting in favour and four against, the budget could not be passed and no money could be spent. Since then, both sides have dug in their heels causing a stalemate.

But taxes, of about €136,000 a year, keep rolling in, as do the official subsidies (about €240,000 is promised). There is even a legacy of €43,000 for the village left in a local will.

Laurence Tripé, 51, is the deputy mayor, married to Serge, 54, a plumber, who is the eighth generation of Tripés to have been born in Saint-Hilliers. She disputes the village has about €900,000 to spend, saying that when the town hall's running costs and other legal obligations are deducted, there is less than €400,000. She admits, though, this is still quite a lot.

She was elected as a deputy mayor in 2008, but claims that when she disagreed with Boisvert he took away her powers. She says: "It's not that we don't want any work done in the village, we are protesting at the mayor running the place as a one-man show. We're not even against the budget – we are against him. We have the village's best interests at heart and we want to run it as a team.

"We would like to have a library in the school, and improve the boules area and the pavements and the changing facilities at the playing field. But we can only get these things done by working together. This has caused a lot of ill feeling in the village."

Her husband agrees: "I was born here, like the mayor, and all we want is to make the village better, but nobody is very motivated now."

Henri Verney, 64, who moved to Saint-Hilliers five years ago, describes himself as a friend of the mayor, then adds: "Well, I was, but not now. The attitude is, you're either with him or against him, and if you make the slightest criticism or disagree, you're against."

At the pretty town hall, the secretary promises to contact the mayor so he can put his point of view. But she does not disclose his mobile number or email address. And he does not call. The second deputy mayor, Agnès Guillon, who supports Boisvert, refuses to talk. "I have nothing to say," she says.

Another villager is vaguely supportive but does not want to talk either. "The dispute is catastrophic. This bad blood means the budget is blocked and we can't get anything done. As a result the village is dying. It would be quite nice to organise a local party, but we can't even do that."

Verney, a Jean-Paul Belmondo lookalike, is happy to chat and show us round the village. "It's a pity, because it's quite a pretty place and it could be better. The only answer now is to wait until the next elections in 2014. The rancour between some of the old families here goes back centuries … it can be quite suffocating."